Mortgage repayment affordability hits toughest level since 2008

New data from Moneyfacts has shown that despite softening house price growth, the burden of mortgage payments is impacting household finances.

The data shows that an average earner is able to put down the required deposit and commit to a mortgage in the past couple of years, but will have found their monthly mortgage payment is close to half of their gross salary, the toughest burden since the 2008 financial crisis.

At the turn of the millennium, the average house price was £78,000, around five times the average wage of £15,800. In 2025 the average house price is £269,000, around seven times the average wage of £37,600 ­- well above standard lending caps.

Since 2000, wages have risen 237% while house prices have increased 345%. If wages had increased at the same rate as house prices since 2000, the average UK salary would be over £54,000 in 2025. In fact, house price inflation has far outpaced the rise in most household goods during this time. A loaf of bread would cost around £2.28 today based on house price inflation, while a dozen eggs would cost £4.73.

Adam French, Head of News at Moneyfacts, said “Affordability may have eased a touch over the past 12 months, but buying a home in 2025 is still too much of a financial stretch for many. Putting aside the not inconsiderable tasks of affording rapidly rising rent costs and saving a sizeable deposit, monthly mortgage repayments are eating up almost half of gross earnings – the toughest burden since the 2008 financial crisis.

“Years of ultra-low borrowing costs, Government incentives and a lack of housing supply have driven house prices far ahead of wages, leaving many buyers caught between high prices, expensive borrowing and strict lending rules. It all means that a typical borrower today will need to take a mortgage over a 50-year term to keep their repayments to a more affordable 35% of gross monthly income.

“There remains an acute risk that the market could overcorrect or overheat depending on the future path of interest rates, inflation and wage growth despite a recent softening of house price growth. We now need a period of stability where modest house price growth allows incomes to catch up so the market can return to more sustainable levels that benefit homeowners, homebuyers and the wider economy. In the meantime, it may mean holding rates where they are until inflation is in check is what is needed to nip another boom-and-bust cycle in the bud.”